Federal and state revenue departments in the United States face a number of problems associated with fraudulent income tax returns. Fraudsters can apply for tax refunds by misrepresenting their identity, by stealing and using identity information from another individual, or by using an identity of a deceased person. The associated revenue loss to the federal and state can be significant, and the process of verifying the legitimacy returns can create costly delays.
Technically well-informed fraud perpetrators with sophisticated deception schemes are likely to continue targeting tax revenue entities, particularly if fraud detection and prevention mechanisms are not in place. Balancing the threats of identity fraud with efficient service for legitimate refunds creates a significant challenge for federal and state revenue departments.